Asia-Pacific shares mostly lower as China manufacturing activity grows

Asian-Pacific shares were mostly down on Tuesday as investors weighed a range of economic data and the possibility of an interest rate hike from the Federal Reserve.

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Hong Kong's Hang Seng index fell 1.75% on news that China's official manufacturing PMI had come in at 50.1, above the 50-point mark separating growth from contraction. Mainland China's Shanghai Composite dipped 0.42% to 3,255.67 and the Shenzhen Component was down 0.8% to close at 12,001.26.
Australia's S&P/ASX 200 closed slightly below the flatline at 7,476.7. Japan's Nikkei 225 ended 0.39% down at 27,327.11 and the Topix lost 0.36% to 1,975.27 as Japan reported an unemployment rate of 2.5% for December, in line with expectations.

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South Korea's benchmark Kospi index declined by 1% to 2,425.08, while the Kosdaq index added 0.25% to 740.49, after South Korea reported a 7.3% drop in year-on-year industrial output for December. This was steeper than expectations, with Reuters having predicted a 5.1% fall. The International Monetary Fund has revised its global growth projections for 2023 upwards, but cautioned that higher interest rates and Russia’s invasion of Ukraine could still weigh on activity.

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Major indexes in the U.S. fell overnight, as investors brace for the busiest week of earnings season and the Federal Open Market Committee's meeting on Tuesday and Wednesday. The Fed is expected to hike rates by one-quarter of a percentage point at the meeting. Microsoft's disappointing revenue forecast last week caused some investors to worry about the earnings of other Big Tech companies. However, Microsoft's stock has since increased, indicating that the market may be more optimistic about the sector as a whole.

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Jeremy Gleeson, a tech fund manager who oversees the AXA Framlington Global Technology Fund, said that Microsoft's recent earnings contained enough bad news to spook investors into selling the stock.

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Gleeson told CNBC's "Squawk Box Europe" that the fact that the stock is up by more than 2% subsequently is an "encouraging" sign for the rest of Big Tech's earnings.
He believes that Apple and Alphabet will have a good week. The International Monetary Fund has revised its global growth projection upwards to 2.9% for 2023, due to better-than-expected domestic factors in several countries, such as the United States and China.

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China's reopening of its economy after a strict Covid lockdown is expected to contribute to higher global growth. This is good news for the global economy, which has been struggling in recent months. China is a major player in the global economy, and its return to growth is expected to have a positive ripple effect on other countries.
The IMF has cautioned that higher interest rates and Russia’s invasion of Ukraine will weigh on activity. China’s reopening could also stall, which may dampen the outlook, it added.

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The new forecast from the IMF shows a 0.2% improvement from their previous forecast in October, but this still marks a decrease from the 3.4% expansion in 2022.
BYD's shares rose 3.84% after the company announced that it expects to see a record year-on-year profit. This is good news for the Chinese EV maker, which has been seeing strong growth in recent years.

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In an exchange filing, BYD forecasts their net profit for 2022 to increase from 1.25 billion yuan to up to 16.3 billion yuan, marking a 1,200% hike compared to 2021. This would be a huge increase compared to their profits this year, and would solidify their position as one of the leading companies in the industry. BYD stated that the projection of a stellar growth is supported by the new energy vehicle industry, which has been "experiencing continued explosive growth." "Despite a challenging external environment and a number of unexpected factors, the company has achieved strong year-on-year growth in new energy vehicle sales," the report stated.

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China's official manufacturing purchasing managers' index (PMI) expanded for the first time since October 2022, according to the National Bureau of Statistics. This is a positive sign for the country's manufacturing sector.

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China's manufacturing activity for January came in at 50.1, above the 50-point threshold separating growth from contraction. This is a positive sign for the Chinese economy, which has been struggling in recent months. The reading of 50.1 beats Reuters' forecasts of 49.8, and stands higher than December's figure of 47. This is good news for the economy, as it indicates that manufacturing activity is expanding.

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China's non-manufacturing PMI, which includes the services, catering and construction sector, rose to 54.5 in January from 41.6 in December.
Samsung Electronics reported a 69% decline in profits to 4.3 trillion won ($3.49 billion) on Tuesday, due to a slump in demand for consumer electronics.
Samsung's earnings release stated that demand for smartphones remained sluggish in the mass market due to continued inflation and geopolitical instability.
Samsung's shares are currently down 3%.

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Gautam Adani, the founder and chairman of the Adani Group, has seen his net worth fall by $36 billion so far this year, according to the Bloomberg Billionaires Index.
Adani, who was once second only to Elon Musk in terms of wealth, has fallen to 11th place on the Bloomberg Billionaire Index. This is according to Monday’s close.
On September 20, 2022, his net worth peaked at $150 billion before falling to $84.4 billion as of Monday's close, according to the index.

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Adani Enterprises' stock price has remained more than 25% lower month-to-date, according to Refinitiv data. The company proceeded with a secondary share sale worth $2.5 billion, which was overshadowed by a rout that wiped out a total of $65 billion as of Monday's close. Monday saw a continued recovery in Chinese stocks, with the benchmark index coming close to a bull market. This positive trend is encouraging for investors and bodes well for the future of the Chinese economy.

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Bernstein's analysts believe that the current rally still has some room to run. They have revealed their top stocks to play it. Asa Pro subscriber, you can read more articles on our site. This gives you access to exclusive content that you can't find anywhere else. South Korea's factory output for December fell 7.3%, its worst annualized reading in more than two and a half years. This is a significant drop from May 2020's figure of a 9.6% plunge.

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The reading was steeper than expected, with a drop of 5.1%. This is worse than the 3.4% decline seen in November.
Stocks closed lower on Monday, with the Dow Jones Industrial Average snapping a six-day win streak. The Dow fell 0.3 percent, while the S&P 500 and Nasdaq both declined 0.2 percent. The Dow Jones Industrial Average fell by 260.99 points, or 0.77%, to 33,717.09 on Monday. The S&P 500 Index declined by 1.3% to 4,017.77, while the Nasdaq Composite Index fell by 1.96% to 11,393.81.

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Tesla's stock has been on the rebound this year, up 38% from its lows at the start of the year. The company has been reporting strong results, with record revenue and earnings last week. CEO Elon Musk said that the company is on track to produce 2 million vehicles this year.

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Worth said on CNBC's "The Exchange" that the name is too active in the options market and that it feels a little bit crowded, steep, and too far too fast.
"It is a difficult rally to sustain," he added. "If you are long, the best play is to exit and go short with new money." Marko Kolanovic, JPMorgan's top market strategist, has warned investors that the early 2023 rally may not be sustainable. He advised investors to be cautious and not to get too caught up in the short-term gains.

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According to analysts, the first quarter of the year is likely to mark a turning point for the market, after which its upward trajectory is unlikely to continue.
Kolanovic said in a Monday note to investors that the fundamental confirmation for the next leg higher might not come, and instead markets could encounter an air-pocket of weaker earnings and activity as they move through Q2 and Q3.

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Kolanovic predicts that the risk of recession will be postponed rather than disappear. Although U.S. gross domestic product rose at an annualized pace of 2.9% in the fourth quarter, the headline number is not as strong as it appears because private demand grew at its weakest pace since the recovery began, according to the strategist.

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Kolanovic wrote that the weak trajectory for US domestic demand keeps recession risk elevated, even as the tightness in labor markets postpones this recession risk. Meanwhile, he said that restrictive real policy rates represent an ongoing headwind, keeping the risk of a recession later in the year high.